Paying the toll: Getting savvy about business taxes easier than you think

 

Photo by Paul Moore

Christina Beirith explains general tax information to a group of business owners at a workshop on July 8.

 

Patricia Couture, co-owner of Busy B’s Barber Shop & Salon, has found her tax forms to be extremely confusing. She said just looking at the form can spur a fit of anxiety and confusion.

“There is a lot on the form that doesn’t pertain to every company and when I am done, it seems to have a lot of blank space,” Couture said.

All that blank space led Couture to the same question that has plagued many business owners for decades when it came to their taxes: Is it filled out correctly?

Taxes can seem like a never-ending maze of red tape and the complexity of state and local taxes takes the greatest toll on small businesses, which have limited time and personnel to tackle tax forms. In addition, recent tax changes at the state and local levels put additional layers of accounting requirements on small businesses, which makes it more important than ever for business owners to improve their tax IQs.

Fortunately, those taxes pay for a number of local and Web resources to assist business owners as they traverse the tumultuous tax track.

Christina Beirith, a revenue auditor at the Washington State Department of Revenue’s (DOR) Bellingham field office, said some business owners have a natural fear of the complexity of business taxes and her job is to alleviate some of that fear.

“Taxes can be scary for everyone and once you realize you don’t have to be afraid, it’s easier to be open minded,” Beirith said.

 

Tax Workshops

Couture said she has been doing her shop’s business taxes for the past two quarters but had no prior experience with business taxes.

In an effort to brush up on her tax skills, Couture went to the DOR’s Bellingham field office where she was told about a general business tax workshop she could attend with other business owners.

Couture attended a workshop on July 8 and found that her taxes were not impossible to understand.

“It seemed scary but it turned out to be not as bad as I originally thought,” Couture said.

Beirith said the workshops are the best part of her job.

“I love getting to talk and being able to show people that it can be done,” Beirith said. “It’s not all that bad.”

At the workshop, Beirith asked the business owners what industries they were in and then framed the workshop in a way that covered tax basics while being relevant to the businesses in attendance.

The workshop presenters taught with specific examples and fielded questions from the business owners that reflected the real-world issues they encountered in their business.

“That’s what it comes down to: helping people understand,” Beirith said. “Because it’s hard and we know it but we want to help as much as we can.”

 

State tax resources

Mike Gowrylow, spokesman for the DOR, said that along with recent changes to state taxes, such as destination-based sales tax which calculates sales tax based on where a product is shipped instead of where it is made, his department has been all over Washington state talking with business owners at chambers of commerce meetings and Rotary functions getting the word out about DOR resources that can help them understand the changes.

“People are concerned,” Gowrylow said. “But our experience has been that once someone comes to explain it all to them, they feel much better about it.”

Gowrylow said the DOR’s Web site is a business owner’s greatest ally in understanding taxes. On the site, businesses can file taxes online; find different sales-tax rates; look up tax incentives; watch online tutorials about complex tax issues; and get information on local workshops.

“The site is very popular,” Gowrylow said. “It’s an easy way to see all that we have to offer.”

Gowrylow said the online tutorials are seeing a lot of traffic. He said 16,895 people watched the department’s business tax outreach video in the past year and more than 2,800 people have watched the destination-based sales tax online tutorial just in the past two months.

Gowrylow said the DOR fields close to 20,000 calls a month from businesses needing help or information on their taxes, which is a good thing because when it comes to taxes, businesses need to be proactive.

Another way to be proactive, Gowrylow said, is to contact DOR and have them analyze your tax approach. Businesses can have an auditor come to their locations to see how companies approach accounting. The auditor then offers helpful hints and fills any knowledge gaps about tax incentives and laws.

“The consultation visits are fun,” Beirith said. “It’s just going out and helping people.”

Gowrylow said businesses can also get what is known as a “letter ruling” where companies can outline what they do and how they account for taxes and DOR will send a letter advising the company to continue its course or make certain adjustments.

Couture said she left the tax workshop feeling surprised at how available Beirith and local auditors are.

“I think I am going to call for the consultation visit,” Couture said. “I might definitely take advantage of that.”

 

Recent tax changes

Beirith said that one of the worst feelings business owners can have is feeling as though they have a good handle on their business taxes and then the tax structure changes.

“Change is hard for all of us,” Beirith said. “That’s why we put so many tools on the Web site to try to help.”

The most recent and substantive changes to tax laws that affect businesses in Bellingham are the destination-based sales tax change, which went into effect on July 1; and changes in the Bellingham Business and Occupation tax. This tax on a business’ gross receipts is now based on a formula that takes into account the different cities where a company does business and location of the work force to determine how the tax is split between the cities where a company operates.

The unifying thread between the two changes is an additional layer of tax accounting for businesses that ship within the state and businesses that operate in multiple locations.

However, Beirith said, the DOR has to pass that responsibility onto the business owner because the job is too huge for the state agency to administer. To do so, Beirith said, the state would essentially have to pay for an accountant for every business in the state.

Beirith said the agency can only afford to pay for a couple hundred auditors who are only able to audit less than 2 percent of all businesses each year.

“That’s why we’ve got to educate business owners as much as we can with these programs and hope that they run with it and stay up on it,” Beirith said.

 

Tax tips:

  • Visit the Washington State Department of Revenue’s Web site often to glean whatever updates are important to your business.
  • Attend general and tax-specific workshops.
  • Stay up-to-date on tax changes
  • Have separate accounts for collecting sales tax and general revenue so you don’t have to find the money when sales taxes are due.
  • Request a consultation visit from a state auditor.

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